Cannabis and the Federal Courts

All participants within the cannabis industry should understand the potential risks of litigating disputes in the federal courts. Federal policy regarding enforcement of the Controlled Substances Act (CSA) has shown ambivalence where the possession and distribution of marijuana is consistent with well-regulated state law. The federal courts, however, have taken a nuanced but strict position with respect to enforcement of cannabis-related contracts and other rights by evaluating whether doing so would require the litigant to actively violate the CSA. For example, various federal courts have enforced cannabis-related rights pertaining to insurance, federal labor and employment statutes, certain federal intellectual property protections, and contracts around ancillary products and services. In those cases, the courts determined that enforcement of the contract or right would not result in the litigant directly profiting from the possession, cultivation or distribution of marijuana.

Many federal courts have drawn a line, however, where enforcing the contract or right would mandate violation of the CSA. Federal courts also have refused to allow the cannabis industry access to protection under some federal laws such as the bankruptcy code and federal trademark registration, regardless of whether the person or entity is directly violating the CSA.

This article depicts how cannabis litigants may be forced to appear in federal court and provides recommendations on steps that may lessen the chances of a federal court invalidating cannabis contracts and other important rights. We also describe a spectrum of enforceability for cannabis-related disputes in the federal courts. [Read More @ Wilson Elder]